Dated at Wellington this 14th day of December 2017.
Nick Kynoch,
General Counsel.
Statement of reasons
This notice comes into force on 18 December 2017 and is revoked on 17 December 2022.
Under section 461A of the Financial Markets Conduct Act 2013 (the Act), the manager of a registered scheme is required to ensure that annual financial statements are prepared for the scheme. If a scheme includes 1 or more separate funds, financial statements are also required for each of the separate funds.
A scheme may be structured so that it consists only of 1 or more separate funds, with investors investing in 1 or more of those funds, and the assets and liabilities of each fund are segregated from those of the other funds. In such a scheme, there are no investors who are not investors in 1 or more of the separate funds, and there are no assets or liabilities that are not assets or liabilities of 1 of the separate funds.
The exemption granted by this notice exempts the manager of such a scheme from the requirement to prepare financial statements for the scheme (as opposed to financial statements for each of the separate funds) provided the criteria in clause 5 are met.
The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the Act, considers it appropriate to grant the exemption because,—
if a registered scheme’s assets and liabilities are segregated in separate funds by the governing document of the registered scheme, there are no assets or liabilities that are not assets or liabilities of 1 of the separate funds:
in such a scheme, financial statements in relation to the scheme as a whole are not meaningful for investors in 1 of the separate funds and may be confusing or misleading, as those investors will have no recourse to assets of other separate funds of the scheme:
the costs associated with a manager having to prepare audited financial statements for the scheme as a whole, as well as for each separate fund, outweigh the benefits to investors:
managers will remain subject to the requirement to prepare financial statements for each separate fund within the registered scheme, and the financial statements for these funds are those relevant to investors when assessing risk and performance:
as such, the FMA is satisfied that the exemption is desirable in order to promote the purposes of the Act, specifically to avoid unnecessary compliance costs and to provide for timely, accurate, and understandable information to assist decision making by investors:
the FMA is further satisfied that the extent of the exemption is not broader than is reasonably necessary to address the matters that give rise to it, given that—
the exemption does not apply to KiwiSaver schemes; and
the exemption will apply only in respect of schemes that consist only of 1 or more separate funds; and
the manager of such as a scheme will continue to be required to prepare financial statements for each separate fund of the scheme.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 18 December 2017.
This notice is administered by the Financial Markets Authority.